• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Internal Assessment: Opportunity Cost

Extracts from this document...

Introduction

Name of article: Economists see financial bailout as necessary Author: Martin Crutsinger, AP Economics Writer Source: Yahoo News, Saturday 20. Sep, 2008 Word Count: 750 The economists are concerned about the financial crisis because the economy could have an adverse effect from the government's efforts. The U.S. Government is trying to rescue the financial system in the form of a chandelled debt burden. The Bush administration is seeking to borrow $700 billion from the Congress in order to use the money to bailout the banks. However, the Congress is ambivalent due to the fact the government is already spending more than $400 billion a year just to pay interest on the national debt. Nevertheless, the economists corroborate the Bush administration; to take definitive action to prevent the financial crises. (Crustinger 2008). In this article, there is an opportunity cost, since resources - the money - is scarce and have alternative uses, for using $700 billion to bailout the bank because the $700 billion could be used for other purposes, for instance, reducing the national debts. ...read more.

Middle

However, if the value of the house price decreases from the value of the original price, it results into problems. Since these consumers cannot handle the interest when the price of the house goes down, as a consequence, they will not be able to pay back the money to the banks. Therefore, the banks have no source of income, and thus are faced with the possibility of becoming bankrupt (as there is a lack of confidence between the consumers and the banks). In addition, the bankruptcy of banks, which provides sub-prime mortgage, gives impact on the other banks like Lehman Bros. The Bush administration has to care about the consumers who have lost their houses and money. Hence, this is the reason why the government is seeking to borrow $700 billion from the Congress to help these people and companies. Bush Administration's solution: However, there are also some possibilities that this solution can fail. ...read more.

Conclusion

And in long terms, the banks will be stabilized, and this will ultimately satisfy the consumers since they can borrow the money from the banks. Nonetheless, ceteris paribus, many economists suggest that this action of bailing out the banks could possibly lead or result into further financial crises because there is no guarantee that the financial crises could be prevented by just providing $700 billion. Regardless of the possible negative consequences, the assumptions presented in the article could be valid due to the fact that the amount of $700 billion could take care of the financial crises. In other words, the $700 billion is sufficient enough to solve the present situation. Therefore, the best alternative will be to use $700 billion to rescue the financial crises, and the government could use the remaining money to alleviate the national debt. Source: Crustinger, Martin. "Economists see financial bailout as necessary." Yahoo! News. Sep 20, 2008. Sep 25, 2008. <http://news.yahoo.com/s/ap/20080920/ap_on_bi_ge/financial_meltdown_ economy;_ylt=AuEfoKbnZD27VMcdNGRZ3jNv24cA> ?? ?? ?? ?? IB SL Economics Block 1 9/26/08 Bonmin Koo Practice Internal Assessment Commentary 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Production Possibility Frontier (PPF)

    The slope of the PPF curve is always negative because of scarcity; as, if the production of product A increases, the production of product B will have to decrease.

  2. Strategic and Operational Performance Assessment at Petrom

    According to Petrom, the loan will be used to cover the financial needs of the company in accordance with the budgets and the current investment programmes of the company.

  1. What is Economics? What do Economists do?

    MB vs. MC Incentives are inducements to take particular actions. When marginal costs or benefits change, then this changes the incentives to take particular actions. Idea 3: Voluntary exchange makes both buyers and sellers better off... and markets are generally an efficient way to organize exchange.

  2. Growth and Development Problem Set - IB Economics exam questions and answers.

    Strengths and weaknesses of HDI Strengths: * Promotes human dimensions of well being of individuals o Some countries with low levels of income can still achieve moderate levels of human development, and vice versa * Widely used summary measure of human development that has stood test of time Weaknesses: *

  1. Internal Assessment

    If the US has indeed sunk to the deepest part of the ocean, the money congress approved to spend may not be enough to vibrate the economy.

  2. Economics Internal Assesment

    Also, the investments which are interest sensitive also become less expensive. This is because; decreasing the interest rates will increase the quantity of Investment slightly due to the inelasticity from the Demand for Investment curve previously shifting back due to lack of expectations Despite the fact that India suffers from

  1. What is the impact of the Notional Interest Tax Deduction system on investments in ...

    Also the government will have to ensure that the projects they do carry out are those that the public are in favour of and may need to increase marketing costs since they will not be able to provide all the same features as before.

  2. Is there possibilities of war for resources?

    Increased fertilizer application and more water usage through irrigation have been responsible for over 70% of the crop yield increase in the past. Yields, however, have nearly stabilized for cereals, partly as a result of low and declining investments in agriculture.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work